The growing US jobs challenge

It could take more than five years—longer than after any postwar downturn—to replace the millions of jobs lost to the 2008–09 recession. How can the US rev up its job creation engine?

June 2011

The United States faces a daunting challenge in creating jobs: at current rates, it will take until 2016 to replace the 7 million of them lost during the 2008–09 recession. To regain full employment—finding work for the unemployed and accommodating the 15 million Americans expected to enter the labor force this decade—the US economy must create 21 million jobs by 2020.

Only under the most optimistic of three scenarios that the McKinsey Global Institute modeled would this be likely to occur, according to a new MGI report, An economy that works: Job creation and America’s future. The study sheds new light on how companies use labor, where new jobs are likely to come from, and what conditions are needed to ensure that they can be created in a sustainable way. In addition to original research and scenario analysis, the report draws on a survey of 2,000 business leaders, as well as interviews with more than 100 business executives, public-sector leaders, educators, and other experts on US labor markets.

Podcast

What it will take to revive US job growth

Byron Auguste, a director in McKinsey’s Washington, DC, office, and Susan Lund, a partner and director of research of MGI, discuss the causes of slow job creation in the United States and the challenges to returning the nation to full employment.

Among the most important findings:

The United States has suffered from increasingly lengthy “jobless recoveries” following recessions during the last two decades. From 1945 to the 1980s, it took roughly six months after GDP rebounded for employment to recover. But after the 1990–91 and 2001 recessions, it took 15 and 39 months, respectively. At the recent rate of net job creation, more than 60 months will be needed to replace the jobs lost in the 2008–09 recession (exhibit).

Six economic sectors will account for as many as 85 percent of all new jobs in this decade: health care, business services, leisure and hospitality, construction, manufacturing, and retailing. The first three will have a disproportionate influence on the total number of jobs generated. Business services, for example, could create as many as 5.7 million of them or as few as 2.4 million.

Assuming current trends, the United States will not have enough workers with the right education and training to fill the jobs likely to emerge. By 2020, there will be up to 1.5 million too few college graduates to meet demand—and 5.9 million more Americans without high school diplomas than employers can use.

At all levels of postsecondary education, Americans are not getting the “job ready” skills that employers say they require. In our survey, 40 percent of the executives whose companies plan to hire next year said they’ve had unfilled openings for six months or longer because they cannot find qualified applicants. The skill gap goes beyond the well-known shortages in technical fields; there are growing shortages of welders, nutritionists, nuclear technicians, and nursing aides, employers say.

Technology is changing the nature of work in ways that create challenges for US employment levels but also open up opportunities. Broadband communications and advanced IT systems make it possible to disaggregate jobs into tasks that can be reassigned to other workers in a given location or elsewhere. Some work now performed by physicians, for example, can be handed off to physician assistants or nurse practitioners, creating demand for those middle-income positions. Also, this approach makes it easier to “onshore” service jobs to low-cost US locations or even to workers in their own homes.

Exhibit

Jobless recoveries: it used to take roughly six months for US employment to recover after recessions, but in recent ones that time span has increased dramatically.

The United States will not return to full employment by following a business-as-usual course; a strong economic recovery will be a prerequisite but is unlikely to be sufficient. To meet the jobs challenge, business and government leaders—and workers, too—must attack the obstacles to employment and have the courage to consider new approaches.

Our analysis identified four areas where progress must be made: ensuring that Americans have the necessary education and skills for the jobs created; seeing to it that global investment generates jobs in the United States; encouraging innovation, the creation of new companies, and the scaling up of new industries in the United States; and clearing the way to growth by making compliance with regulations less onerous.

Stay connected

About Insights & Publications

The creation of knowledge supports McKinsey’s core mission: helping our clients achieve distinctive, lasting, and substantial performance improvements. We publish our insights and those of external experts to help advance the practice of management and provide leaders with facts on which to base business and policy decisions. Views expressed by third-party authors are theirs alone.